The evolution of the payments ecosystem has forced the modernization of treasury functions, as companies are rapidly adopting digital methods of managing data and funds flowing in and out of the business. Treasury banks play an important role in helping corporate clients navigate this new real-time digital world payments landscape. Yet industry observers point to the need for a more proactive approach to understanding the relationship between the Treasury bank and its corporate and/or government clients, in order to proactively mitigate the risks of engaging in a world real-time digital.
“There is a great need for immediate solution integration and immediate value to the bottom line when considering corporate and government customers and customers of Treasury banking partners,” chuck moorevice president of product management at Early warning services, said PYMNTS. He noted that the long integration periods and point solutions of the legacy treasury banking system need to pivot faster to API-based solutions to react to changes in cash flow and to data solutions that inform smarter decision making.
Balancing Fraud Mitigation, Privacy, and Absolute Zero Friction
As payments accelerate, the window for verifying account holders at each end of transactions becomes even smaller.
Moore noted that the rise of e-commerce and the gig economy has led to tremendous interest and growth in the identity space, which reinforces the importance of validating the identity of the recipient and the sender before transactions occur. In a real-time world, authenticating individuals is critical to reducing risk to both business and consumer.
Take hospitality, for example, when a landlord partners with a third party to rent out a property at certain times of the year. Moore explained that validating the identity of the landlord or tenant becomes critical — not only to a payment transaction, but also to the consumer’s relationship, asset, and convenience. “We see a strong demand for valid IDs and verified IDs early in the process,” Moore said.
“The ecosystem we live in is made up of faster real-time payments, and that will continue to progress as we move forward. Intermediate steps or blockages in the process will not be acceptable. We need to balance three key areas to be effective as we look at account verification as a whole,” Moore said.
Fraud prevention is the first and most critical area to consider when discussing identity verification. The industry is witnessing a continued increase in attacks from a fraud perspective. “Consumers are bearing the brunt of fraud charges, as the latest data suggests,” Moore noted. “These frauds need to be mitigated.”
Privacy, the second critical need for identity verification, is often overlooked, but data minimization and privacy of consumer information are key. “This is a difficult question to balance, as you are looking to mitigate fraud while ensuring that you only provide relevant data to the business to validate the identity of the account. This is a critical element that is too often overlooked,” Moore said.
“Absolute zero friction” is the third most critical element to balance when verifying identity. Moore explained that companies want to reduce fraud, but the consumer is working with the company or a government entity to complete a transaction. The buying and negotiating process is always in demand and friction needs to be eliminated. Making a micro-depot, for example, is a friction-filled process and requires robust solutions.
“We have to consider all of the forces at play here – not just reducing fraud, but really taking care of that consumer and the process for our businesses. If we’re offering products that are hard to integrate and hard to use for the consumer, they won’t be effective,” Moore said.
“Early Warning was designed to balance these three strengths – fraud mitigation, privacy and absolute zero friction – and integrate them into existing systems, using aliases to hide the identity of the sender and only sharing most relevant information between businesses and customers,” Moore explained.
The role of treasury banks
A hundred years ago, consumers established face-to-face relationships with corporations and businesses, which established the identity of both parties and reduced friction through good service. Some of these values, such as quality service and trusting relationships between businesses and consumers, are still relevant in the digital world. Companies must clearly demonstrate that they know their consumers, Moore said.
He thinks the industry needs to be diligent in bringing in additional data and modeling equipment to combat fraudulent attempts on the technology side. While the experience should be seamless to the end consumer, there should be a system to identify potential threats and instantly notify the Treasury bank and corporate client of this activity.
“I think treasury banks are in a unique position to do that because they’re intimate with how money flows and how fraudulent behavior affects processes – and they’re also intimate with the tools and technologies. [that have the ability to provide a solution to the challenges]”Moore said.